[SketchySeaBeast]

What does what you have in your 401k matter if your house and car are being repossessed? I suppose you could pull it all out at penalties and with a bunch of taxes, but that's going to be work, and assumes you have enough in there to make it worthwhile.

[CydeWeys]

Penalties are waived for certain exigent circumstances, which I believe this would qualify as.

[SketchySeaBeast]

The larger penalty would still probably be the taxes, which I assume aren't waved, and again assume there's enough in there to make it worthwhile. I know for myself, even though I've been diligently saving for my relatively short career, I don't think there is.

[xyzzyz]

You are going to pay those taxes anyway when you retire. 401k is only beneficial if you expect to pay lower tax rate when you finally retire. Unless you expect the federal tax rates to go significantly down across the board, withdrawing from 401k when you have no other income is actually a great idea, or it would be without the 10% penalty.

However, you typically can borrow money from your 401k, and pay no penalty, which makes it a good option if you need temporary liquidity.

[CydeWeys]

And considering how early this pandemic hit in the year, if you were laid off in March you didn't even make 25% of your salary yet. That means your taxes are likely to be quite low for the year, so this is actually a good time to withdraw money from a 401k and take the tax hit.

If I ever have a full year gap between jobs (like some kind of a long sabbatical), I'm going to be doing a lot of Traditional to Roth converting, for exactly this reason.

[standardUser]

There is in fact a special exemption this year to the 10% tax penalty for taking money out of retirement accounts for COVID-19 related purposes. But make sure your specific account offers that exemption before withdrawing anything.